Jordan's Economic Zones Aim to Attract Investment and

UNCLAS SECTION 01 OF 03 AMMAN 003909

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STATE FOR NEA/ELA, EEB
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E.O. 12958: N/A
TAGS: ECON ETRD PGOV JO
SUBJECT: Jordan's Economic Zones Aim to Attract Investment and
Address Poverty and Unemployment

Refs: A) Amman 3806
B) Amman 2017
C) Amman 263


1. Summary: Jordan has taken an approach of developing
geographically delineated, policy-favored commercial zones to
attract investment and promote economic development. In addition to
industrial estates and free zones, King Abdullah recently announced
the launch of a fourth economic development zone in Ma'an, based on
the model of the special economic zones in Aqaba, Mafraq and Irbid.
All aim to alleviate poverty and create jobs in these impoverished
areas of Jordan through development of industrial centers supported
by logistics, transport, utilities, and information technology
services. While the various commercial zones have succeeded in many
of their goals, their future role may diminish as customs duties and
tariffs continue to decrease in line with Jordan's free trade
agreements and World Trade Organization commitments. In a
relatively small country, the creation of additional economic
development zones may become redundant and distract from a larger
liberal policy of making all of Jordan "special." End Summary.


Jordan's Zone Approach
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2. As part of Jordan's efforts to foster economic development and
enhance the investment climate, the government has created
geographically demarcated, policy-favored commercial zones,
including industrial estates, free zones, and special economic
zones. The goal is to encourage "clustering" among related firms
within an industry and linkages to other industries. Some of these
zones actually overlap or have multiple designations. For example,
the industrial estate in Karak, situated just east of the Dead Sea,
has a free zone within it, and the industrial estate in the Red Sea
port city of Aqaba is within the boundaries of the Aqaba Special
Economic Zone. Many are also designated Qualifying Industrial Zones
(QIZs). NOTE: According to a Jordan-Israel-U.S. agreement, approved
goods produced in thirteen designated QIZs in Jordan can be imported
into the United States duty- and quota-free if 35 percent of the
product's content comes from the QIZ, Israel, the West Bank/Gaza,
and/or the U.S. (Ref C). END NOTE.

Industrial Estates
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3. The semi-governmental Jordan Industrial Estates Corporation
(JIEC) currently owns five public industrial estates in Irbid,
Karak, Aqaba, Amman, and Ma'an. There are also several
privately-run industrial parks in Jordan, including al-Mushatta,
al-Tajamouat, al-Dulayl, Cyber City, al-Qastal, Jordan Gateway, and
al-Hallabat. These estates provide basic infrastructure networks
for a wide variety of manufacturing activities, reducing the cost of
utilities and providing cost-effective land and factory buildings.
Investors in the estates also receive various exemptions, including
a two-year exemption on income and social services taxes, total
exemptions from building and land taxes, and exemptions or
reductions on most municipalities' fees.

Free Zones
--------------


4. Jordan also has public "free zones" (FZs) in Zarka, Sahab,
Karak, Karama, and Queen Alia Airport that are run by the
publicly-owned Free Zone Corporation (FZC). Over 30 private free
zones have also been designated, which are administered by private
companies under the supervision of the FZC. Considered outside the
Jordan Customs jurisdiction, the free zones provide a duty- and
tax-free environment designed for the storage of goods transiting
Jordan. Firms located in such zones can avoid import duties and
fees, company income taxes, licensing fees for construction,
building and land taxes, and value-added taxes on goods exported or
transiting internationally across Jordan (Ref C). Non-Jordanians
working in the FZ's are also exempt from personal income tax and
social services tax.

Economic Development Zones
--------------


5. The Aqaba Special Economic Zone, created in 2001, was the first
special economic zone with the goal of alleviating poverty and
creating jobs in that area (see reftels for additional background).
Offering special tax exemptions and a flat five percent income tax,
ASEZ has attracted over USD 2 billion in foreign direct investment
in recent years, mainly in hotel and property development. Given
this success, the Government of Jordan (GOJ) plans to replicate the
model throughout the country, and is currently doing so in Mafraq
and Irbid in the north, and in Ma'an in the south. However, the

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World Bank has cautioned that the Special Economic Zones generally
have the disadvantage of favoring isolated free market enclaves
while distracting attention from countrywide trade liberalization
and reform.

Mafraq Economic Zone
--------------


6. Jordan created a second economic zone - the King Hussein Bin
Talal Economic Zone - in November 2006 in the city of Mafraq. It
comprises 20.5 sq km of currently empty land that will be built
around industrial activities, supported by logistics and transit
services. High-end villas, low-cost labor accommodations, and
community services and utilities will also be built to support
employers' needs. Implementation of development projects estimated
at over USD 1 billion is expected to take some 15 years from start
to finish. The Mafraq Zone hopes to provide 29,000 new "direct"
jobs by 2025, as well as indirect jobs for an available labor FORCE
of around 240,000 workers within a 50 kilometer radius.


7. Given its location at the intersection of two major highways
(Syria-Aqaba and Irbid-Baghdad) and access to the Amman-Damascus
railroad, the Mafraq Zone aims to be a "junction" point for
logistics, according to General Manager of the Mafraq Development
Company Rami Al-Qusus. The zone is also adjacent to the King
Hussein airbase, which has an international runway that has been
used for training by the Royal AIR Force. The airport currently
only services cargo but will be converted for mixed use in the
future. Qusus told Econoff that he is looking for any opportunities
to increase business at the airbase, including support of U.S.
government transport for Iraq.


8. The Mafraq Zone will target four priority industries: chemicals
(including pharmaceuticals); engineering and electrical equipment;
food processing; and textiles, apparel, furniture and other
manufactured articles. Initial investments include a USD 21 million
production facility by Petra Engineering Industries, which has been
successfully exporting AIR conditioners to the U.S. under the
U.S.-Jordan FTA; a USD 49.4 million modern cable manufacturing
facility by MESC Specialized Cables in association with Fujikura
(Japan); a factory to manufacture freezers and cooling units by
Future and Ugur; and a USD 20 million aluminum manufacturing plant
by Emaar Industries and Investments MultiForms.


9. Qusus highlighted that he does not want Mafraq to be considered
a special economic zone with a separate law or separate customs,
like ASEZ, that would then not allow exports to receive preferential
treatment under some of Jordan's free trade agreements, particularly
the Greater Arab Free Trade Agreement. NOTE: The U.S.-Jordan FTA
does apply to the Aqaba Special Economic Zone. END NOTE. He is,
however, working with the GOJ to arrange special customs, tax, and
other bureaucratic regulations to increase the zone's investment
appeal relative to other economic zones in Jordan. In particular,
he plans to establish a one-stop shop and conduct post-audits of
investors, rather than pre-audits, in order to speed up the process
of granting licenses. He also wants 24-hour service for a land-air
freight system so that goods that land via AIR in Amman can be
directly loaded onto trucks and transported to Mafraq, where they
would then clear customs. Another proposal is exemption of duties
on construction materials.

Irbid Economic Zone
--------------


10. The Irbid Economic Zone was launched in May 2007 by King
Abdullah as a healthcare, education, and information technology free
zone in the northern city of Irbid. Its proximity to the campus of
the Jordan University for Science and Technology (JUST) encourages
partnerships between the firms in the zone and the university
students. The zone aims to create 23,000 jobs and reduce
unemployment in Irbid, where around 17.5 percent of its one million
inhabitants are jobless.


11. In particular, the Irbid development projects will include
hospitals, clinics, and medical facilities to increase the
healthcare staff in Jordan and service some 100,000 patients from
Arab states who seek treatment in Jordan annually. During the May
2007 World Economic Forum held in Jordan, an agreement was signed
with anchor tenants of the zone to establish a nursing college for a
total investment of US$35 million. COMMENT: The focus on such
service sectors seems appropriate given that Irbid also has the
nearby Sahab Industrial Estate and Al-Hassan Qualifying Industrial
Zone (QIZ) that caters to manufacturing industries, specifically in
apparel. END COMMENT.

Ma'an Economic Development Zone
--------------

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12. On September 9, the King launched the fourth Economic
Development Zone in Ma'an, a governorate 210 kilometers south of the
capital. It is an important transport hub situated on the modern
Desert Highway linking Jordan with Saudi Arabia. The Ma'an Zone
covers all of the districts in Ma'an Governorate including Shobak,
Petra, and Southern Badia. Plans for the zone include
infrastructure projects estimated at USD200 million, and the
creation of 7,000 jobs by the end of 2025. King Abdullah recently
met with the local community and civil societies in Ma'an, publicly
stressing the strong role they need to play in developing
appropriate proposals for the zone.

Comment
--------------


13. Jordan's various commercial zones have helped promote trade,
investment, and economic development, particularly in impoverished
areas. Some have noted, though, the future role of such zones may
diminish as customs duties and tariffs continue to decrease in line
with Jordan's free trade agreements and World Trade Organization
(WTO) commitments, and central and local government continue to
reform delivery of their services and reduce the need to cut through
bureaucracy. In a relatively small country, the creation of
additional economic development zones may become redundant and
distract from a larger liberal policy of making all of Jordan
"special."

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